ITT Pressured By Delayed Cost Recoveries And Weakening Short-Cycle Markets

Above-average organic revenue growth and margin expansion haven't helped sentiment around ITT (NYSE:ITT) all that much, as this diversified industrial has continued to underperform relative to the broader industrial group. A cautious tone from management about 2023 hasn't really helped (even if I think it's a more realistic view than what other companies have offered), and investors are trying to figure out just what the macro outlook for 2023 is going to be.

Down more than 10% since my last update on the company, I have mixed feelings about the stock. I think the company has better cycle exposure than the valuation reflects, but delays in driving better price/cost mix and a heavy exposure to auto builds are not what the Street really wants now. High single-digit long-term annualized return potential isn't bad, but I think it may take a few quarters for these shares to work again, and it's hard to call this a must-own when investors have a wider selection of undervalued industrial stocks to choose from at the moment.

 

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ITT Pressured By Delayed Cost Recoveries And Weakening Short-Cycle Markets